In the late 1860s, there was an American movement to plan an economic takeover of Canada, forcing Canada to seek admission into the United States. The people involved wanted control of the railroads and the trade that rail traffic generated. Sir Hugh Allan was president of the Canadian Pacific Railway. Some of his American partners shared this view and wanted a Canadian railway to travel south from Ontario to connect with the Northern Pacific Railroad, which was nearing completion. This would leave the Canadian northwest open for American trade. Canadians, fearing any close contact with the United States, were skeptical of any deals involving US financiers.

Macdonald and Cartier approached Allan, promising the lucrative contract to build the trans-Canadian railway in exchange for a financial contribution to the Conservative Party. Allan gave them close to $350,000 from American investors. Macdonald's Conservative government came to power, and Allan got the contract. But by the end of 1872, the American investors had begun to lose patience when Allan hadn't undertaken the work and they seemed to be excluded from the railroad project. Rumours of embezzlement began to circulate in Ottawa.
On July 18, 1873, The Globe, a liberal newspaper from Toronto, published a telegram from Macdonald to Allan in which Macdonald begged the powerful businessman for money. The press seized the story and revealed the American funding sources that contributed to the Conservative victory. Macdonald submitted his government's resignation on November 5.